USD/CAD greets the new trading year for 2019 with a fresh round of risk-off trading, sending investors back-pedaling into the US Dollar and sending the Dollar-Loonie pairing back into recent highs as the same problems that plagued markets into the bitter end of 2018 have followed through into 2019. The USD/CAD pair extended its sharp intraday slide and tumbled to 1.3568 area in the last hour, albeit quickly recovered over 40-pips thereafter. After repeated failed attempts to make it through the 1.3660-65 strong horizontal resistance, the prevalent bearish sentiment surrounding the US Dollar prompted some aggressive long-unwinding trade on the first trading day of the New Year.
Crude Oil Weakness Created Lack of Support For Loonie
The USD bulls held on the defensive amid expectations of a slower pace of Fed rate hikes in 2019, which coupled with partial US government shutdown turned out to be one of the key factors exerting some downward pressure on the major. However, the ongoing downfall in crude oil prices amid concerns over global economic growth and a surge in US oil output and inventory data undermined the commodity-linked currency – Loonie and helped limit deeper losses. The pair has now moved back above the 1.3600 handle and in absence of any major market moving economic releases, the USD/oil price dynamics might continue to act as key determinants of the momentum through Wednesday’s trading session.
In immediate market lack of fundamental support for Loonie hints at USD bulls gaining upper hand but political and economic crisis in US markets hints that US Greenback also faces equal bearish pressure. The only factor supporting USD’s positive price action in broad market despite broad based weakness for US Greenback is overwhelming decline in crude oil price. However positive progress in Sino-U.S. trade negotiations or positive impact from OPEC’s planned production and supply cuts will help oil price regain momentum in broad market boosting Canadian Loonie as trading session moves further into January 2019.
This article was originally posted on FX Empire
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